Russia may become world's leader in shale oil production – BP

According to BP analysts, Russia may become one of the world's chief countries in shale oil production. Tax incentives are already in place, the only stumbling block is the technology.

According to a BP forecast, in 20 years' time, Russia will
become the world's second largest tight oil producer. The company's experts
estimate that by 2035 it will be producing 800,000 barrels of shale oil a day.

When it comes to shale oil, there is a confusion in terms between Russia and the United States. What is known in the U.S. as shale oil, meaning that it is produced from oil shale, has been since Soviet times known in Russia as tight or unconventional oil.

Russia's oil majors
confirm BP experts' predictions by declaring that they view unconventional oil
production as a priority. A source at Rosneft said that the company's estimated
reserves of shale oil stood at about 1.4 billion tons.

In the near future
Rosneft expects to increase its unconventional oil production and, through the
use of new technologies, arrive at an annual production of 10 million to 15
million tons.

Lukoil is continuing with its tests at Bazhenov
formation deposits in the Khanty-Mansi Autonomous Area and expects to identify
the necessary technologies and move on to commercial production, the company's
representative said. Gazprom Neft was unavailable for comment.

Russia has begun to
reform is tax system in order to create favorable conditions for applying
technologies that are required for unconventional oil production. As a result,
the country could be looking at becoming a world leader in shale oil
production.

As of late last year and extending for a period
of 10 years to 15 years, a zero-rate mineral extraction tax will apply to four
tight oil deposits: Bazhenov, Abalak, Khadum, and Domanik.

The Russian Energy
Ministry estimates that by 2032 the proposed incentives may result in
additional oil production of some 326 million tons, generating an additional
$66 billion (some 2,000 billion rubles) in taxes, Minister Alexander Novak said
in an interview with РБК daily at the end of last year.

As one oil company employee pointed out, shale oil
production is a necessity that the whole industry is facing. As traditional oil
reserves are depleting, oil companies have to search for new sources of
hydrocarbon resources.

For the state companies that have access to Russia's
continental shelf, a long-term way out may be offshore oil production in the
Arctic, but that will take many decades. For the medium-term, the only thing
that could bolster falling production is the development of unconventional
reserves, the paper's source concluded.

In Russia the term tight oil is a broader term that covers oil produced not only from oil shale but also from other petroleum-bearing formations of law permeability. It includes, for instance, oil produced from clay rock or oil produced from deposits in the Bazhenov formation. The technology used to produce shale or any other type of tight, unconventional, oil is practically the same.